Tesla Stock Jumps 11% on LBO News

US stocks opened higher overnight and remained positive in what was a fairly low volatility session. The S&P 500 closed 0.3% higher while the Dow was up 0.5% although one of the most interesting stories comes from Tesla (TSLA) which jumped 11% on news that CEO Elon Musk is planning to organise a leveraged buyout (LBO) of the company at US$420 per share. This is a significant premium to the current price $380 per share even after today’s jump. The most curious aspect of this news is that it was announced via Twitter rather than an official company announcement. Many in the market are sceptical that Musk has actually arranged financing to perform the buyout and that it may just be a stunt to burn short sellers. It wouldn’t be the first time Musk has tried to punish short sellers although he is at risk of market manipulation charges if today’s announcement doesn’t prove to be accurate.

Yesterday the Reserve Bank of Australia (RBA) decided to keep rates on hold, as widely expected, which now brings to two years the time which the rate has been unchanged at 1.5%. The accompanying statement had little impact on financial markets although the AUD did rally back above US$0.74 where it currently sits at $0.742. Unemployment is forecast to gradually decline to 5% over the next couple of years although the bank is slightly concerned by slowing growth in China. Market pricing suggests a rate hike now won’t occur until sometime in 2020. Tomorrow morning the Reserve Bank of New Zealand will meet to decide interest rates although it is expected to remain on hold at 1.75%.

Data Releases:

-    China Trade Balance 12:00pm AEST (tentative)

This article was written by William O'Loughlin - Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.